Nicola Culley attempts to discover how to broaden the appeal of term assurance.
Zurich recently announced it planned to make its protection business more attractive to the mass market. Advisers were quick to welcome the move, but said flexible menu-based capability and family income benefit options would be vital when it came to a more appealing term assurance offering.
But, while product flexibility has been cited as a major client need, such developments could be rendered null and void if the struggling consumer favours lower-priced straight forward cover. So what is the way forward for term assurance to evolve?
In June last year, Swiss Re's Term and Health Watch 2012 report showed the protection gap had increased by 20% from £2trn to £2.4trn, in the past 10 years; with sales of new term assurance policies falling by 3.4%.
In its statement at the time, the re-insurer stressed under-insurance in both term assurance and income protection areas was proving to be a long-term problem in the UK.
Russell Higginbotham, chief executive at Swiss Re, said at the time: "The industry is faced with the challenge of better communicating to consumers how to alleviate the financial burden placed on families and dependents in difficult times."
On problem could be product limitations. Some advisers have aired a few issues around bolt-on features and lack of menu-based processes.
Churn unavoidable
John Morgan, financial adviser at Pethericks & Gillard, said he found churn often unavoidable with term assurance because products were currently not flexible enough to accommodate life changes.
He said: "The FSA is worried about churning business yet it has been going on with term assurance because some insurers just do not make the products flexible enough.
"Policies are just not flexible enough to be altered to reflect on-going and future developments. There are too many limitations."
Morgan said he had "certainly" found it to be the case with many of the main market players, and championed Scottish Provident and L&G for their flexible menu-based approach.
According to Morgan, the issue was getting better but there was still more to be done. In his mind, the market needed all-singing, all-dancing value products with no restrictions.
